Tax Professionals Applications and Definitions
Tax professionals rely on the accuracy of certified appraisal reports prepared by a CMEA when faced with these common applications listed below.
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1031 Exchanges are one of the best-kept secrets of the IRS. Assets require a proper valuation when deferring taxes for a like-kind exchange to pass IRS scrutiny.
C Corp to S Corp Conversions
The federal tax code requires an appraisal of the assets to convert from a C Corporation to an S Corporation.
Cost segregation is a process that identifies personal property assets and assigns a substantiated taxable value to maximize a depreciation deduction. These assets are often buried in real property assets, and a certified report is required to verify these values.
Taxpayers must obtain a qualified appraisal to substantiate deductions for some charitable contributions due to the Pension Protection Act of 2006 regarding non-cash donations. In general, a taxpayer needs a qualified appraisal for many types of non-cash donations that hold a value of more than $5,000. The PPA requires this to be a professional appraisal guided by the generally accepted appraisal standards.
Employee Stock Ownership Plans (ESOPs)
When a business has or is considering an employee stock ownership plan, (ESOP), it is important first to know the initial asset values by obtaining an accurate appraisal of tangible assets like machinery and equipment. These values must be based on the current, fair market value rather than book value which is not accurate and will not hold up should there be a dispute.
Legal trusts and wills must contain accurate property values to ensure assets are distributed appropriately when settling an estate.
Government agencies are required to value infrastructure assets on their financial statements.
Personal property taxes are assessed based on market value. At times, a business owner and local municipality may disagree regarding the market value so a certified machinery and equipment appraisal would be necessary to settle the dispute.
For a business owner, retirement planning requires careful consideration of the true value of a business’ assets. These assets may be systematically liquidated to fund for retirement. A certified appraisal report would also be necessary when selling the business, providing substantiated value necessary for the transaction.
A certified appraisal report is necessary to provide substantiated values for those involved in trust agreements.